Saturday, June 17, 2017

Paul Krugman on Trump Zombie Economic Policy

As President Trump continues to launch absurd economic policy after absurd economic policy, it continues to make such horrific thinking Keynesian economists such as Larry Summers and Paul Krugman look good in comparison.The latest example comes via the Trump announcement on Thursday that he is launching a crony taxpayer funded apprenticeship program to bridge the "skills gap."The New York Timesreported:

President Trump is taking one of the most concrete steps of his presidency on Thursday to address the employment prospects of workers left behind by the current economic expansion. In doing so, he also joins a long-running and occasionally contentious debate over whether those workers have the skills they need to land desirable jobs.

Mr. Trump’s action comes in the form of an executive order expanding federally funded apprenticeship programs...

In the eyes of the president and many corporate leaders, the crux of the problem is skills — the proposition that employers are eager to fill millions of good-paying jobs that workers lack the skills to perform.

This is total nonsense though, and Krugman is on top of it.

Remember, the original argument was that gap meant we couldn't get back to pre-2008 unemployment -- except we did https://t.co/PbI4Pxcu8l

He linked to a 2014 commentary where he discussed the phony "skills gap":

A few months ago, Jamie Dimon, the chief executive of JPMorgan Chase, and Marlene Seltzer, the chief executive of Jobs for the Future, published an article in Politico titled “Closing the Skills Gap.” They began portentously: “Today, nearly 11 million Americans are unemployed. Yet, at the same time, 4 million jobs sit unfilled” — supposedly demonstrating “the gulf between the skills job seekers currently have and the skills employers need.”

Actually, in an ever-changing economy there are always some positions unfilled even while some workers are unemployed, and the current ratio of vacancies to unemployed workers is far below normal. Meanwhile, multiple careful studies have found no support for claims that inadequate worker skills explain high unemployment.

But the belief that America suffers from a severe “skills gap” is one of those things that everyone important knows must be true, because everyone they know says it’s true. It’s a prime example of a zombie idea — an idea that should have been killed by evidence, but refuses to die.

And it does a lot of harm. Before we get there, however, what do we actually know about skills and jobs?

Think about what we would expect to find if there really were a skills shortage. Above all, we should see workers with the right skills doing well, while only those without those skills are doing badly. We don’t.

Yes, workers with a lot of formal education have lower unemployment than those with less, but that’s always true, in good times and bad. The crucial point is that unemployment remains much higher among workers at all education levels than it was before the financial crisis. The same is true across occupations: workers in every major category are doing worse than they were in 2007.

Some employers do complain that they’re finding it hard to find workers with the skills they need. But show us the money: If employers are really crying out for certain skills, they should be willing to offer higher wages to attract workers with those skills. In reality, however, it’s very hard to find groups of workers getting big wage increases, and the cases you can find don’t fit the conventional wisdom at all. It’s good, for example, that workers who know how to operate a sewing machine are seeing significant raises in wages, but I very much doubt that these are the skills people who make a lot of noise about the alleged gap have in mind.

And if you need more evidence that this is a crony deal rather than some bridging the "skills gap" program. Just look who is supporting the program: fast and casual food restaurants. From the New York Times:

“We applaud the Department of Labor and the administration for being willing to look at how to craft this in a way that brings apprenticeships to a new range of audiences,” said Rob Gifford, executive vice president of the National Restaurant Association Educational Foundation, which oversees the industry group’s apprenticeship programs.

3 comments:

Mr. Trump’s action comes in the form of an EXECUTIVE ORDER EXPANDING FEDERALLY FUNDED APPRENTICESHIP PROGRAMS...

The fundamental nature of this “program” is something Democrats should love and Republicans should hate. The fact that this does not register at all with the public demonstrates the complete failure of Austrian School and libertarian outreach.

Government creates the minimum wage and sets it high enough that people without skills aren't hired. After some time there is a so-called shortage of people with the skills needed to be paid at the minimum wage or above. Why? On the job training slowed or stopped because of the minimum wage being too high. Government fixes this problem it made by creating an apprenticeship program.